Keywords: Belt and Road Forum, China’s online encyclopedia, One Country Two Systems, cross-strait relations, Tsai Ing-wen.

CHINA – ECONOMY

 1. Belt and Road Forum on May 14 and 15

Background about the Belt and Road Forum

The Belt and Road Initiative can date back to 2013 when Xi Jinping first proposed it. According to the action plan in 2015, the Initiative covers three land routes from China to Europe through Central Asia, and two sea routes connecting China with Southeast Asia as well as Africa. The initiative intends to attract investments for infrastructure and boost up economic growth in the countries lying in and around the Belt and Road. During May 14 and 15 in 2017, Xi Jinping hosted the Belt and Road Forum (BRF) for International Cooperation. Heads of state and government, leaders of international organizations, ministerial-level officials and delegates from various countries and regions were invited to participate in the forum. Xinhua’s commentary on the B & R Forum urged the world to grasp the opportunities offered by the initiative and stressed China’s intention as being open, inclusive, and promote win-win cooperation. Details of the forum can be found in the official website here. During the BRF, the Chinese government announced to inject funds of 100 billion RMB to the Belt and Road Fund, and to set aside 60 billion RMB to the developing countries along the Belt and Road (Xinhua). After the Forum, some attending countries issued a joint communiqué which upholds multilateralism and global trade through the Belt and Road Initiatives. Xi Jinping announced that another BRF will be held two years later in 2019.

• //With openness, inclusiveness and win-win cooperation at its core, the land-based Silk Road Economic Belt and the 21st-Century Maritime Silk Road will result in better transportation infrastructure, increased investment, upgraded trade facilitation, enhanced financial cooperation and improved cultural exchanges. In the spirit of openness and inclusiveness, China has explicitly stated that the initiative is open to all like-minded countries and regions that are keen to secure a stake in a project based on extensive participation. In the spirit of win-win cooperation, China has no intention of monopolizing the benefits or even seizing the lion’s share. All partner countries must have the opportunity to take on as much, or as little as they can bear. […] Though the B&R proposal is “Made by China,” it is for all countries to enjoy and entails all partners to contribute. […] As part of the efforts, the upcoming Belt and Road Forum (BRF) for International Cooperation, on May 14 and 15, is expected to facilitate dialogue and action on important bilateral and multi-lateral cooperation fields.// Source: Xinhua, 05 May 2017.

• //In 2013, Xi raised the idea of developing a new economic belt on land and a 21st-century maritime Silk Road, known as the Belt and Road initiative, to better connect China with Europe, Africa and the rest of Asia to boost trade ties. […] According to the 2015 action plan, there will be three land routes. A northern trade route will go from China through Central Asia and Russia to the Baltic Sea in Europe. A central route will link China with the Persian Gulf and the Mediterranean Sea via Central Asia and the Middle East. A southern trade route will connect China with Southeast Asia, South Asia and the Indian Ocean. There will be two sea routes — one going west to Europe through the South China Sea and the Indian Ocean, and the other going south and east through the South China Sea to the South Pacific. According to the official Belt and Road website, there are 64 countries along these routes. While these countries have a combined population of 4.4 billion, accounting for 63% of the world’s total, their gross domestic product (GDP) totaled $21 trillion, or 29% of the global GDP.// Source: Caixin, 24 April 2017.

Priority areas of cooperation: infrastructure and people-to-people exchange

• //Policy coordination is key to effective implementation of the Belt and Road Initiative. […] While respect for each other’s sovereignty and security concerns is indispensable, a closer alignment of infrastructure development planning and technical standards is called for between the countries along the Belt and Road. […] Removing barriers to trade with the aim of unleashing the potential for greater cooperation between countries involved is a major task in building the Belt and Road. […] Financial integration is an important support for the Belt and Road Initiative. […] People-to-people ties provide an anchor for the Belt and Road Initiative. […] To this end, the countries along the Belt and Road are encouraged to step up friendly cooperation in the Silk Road tradition by promoting extensive cultural, academic, scientific, media, and other people-to-people exchanges, including those between youths, women, and volunteer groups, so as to consolidate public support for bilateral and multilateral cooperation.// Source: Xinhua, 08 May 2017.

• //China established the US$40 billion Silk Road Fund in early 2014 to fund the scheme’s infrastructure projects, including the creation of six economic corridors by building roads, railways, pipelines and highways. Additional financing will come from the Asian Infrastructure Investment Bank (AIIB), the China-backed global bank launched in October 2014 and the New Development Bank (NDB), a Shanghai-based bank for the BRICS (Brazil, Russia, India, China, South Africa) countries. In what is expected to be China’s biggest diplomatic event of the year, state leaders will meet in Beijing to discuss the initiative over two days. In January, Xi said the summit was a chance to brainstorm on ways to address regional and global economic problems, and ensure the initiative delivered benefits to all countries involved. Top leaders from at least 28 countries have confirmed their attendance at the summit, including major southeast Asian leaders, as well as Russian President Vladimir Putin. But only one G7 leader is expected to show – Italian Prime Minister Paolo Gentiloni. When Chinese Foreign Minister Wang Yi announced the summit’s guest list in April, he did not mention officials from South Korea, North Korea, or Japan – which have strained ties with China.// Source: SCMP, 08 May 2017.

China’s positioning

The Chinese official media reiterated the discourse of China’s multilateralism at the Belt and Road Forum and it is poised to contrast the West’s “small-circle”.

• //Zhao Lei, a professor at the influential Central Party School that trains rising officials, told the China Daily the initiative was “poised to provide more inclusivity than the Western-led elite clubs”. A senior Beijing-based Western diplomat said the May forum was an attempt to “institutionalize” China’s otherwise amorphous “One Belt, One Road” scheme, while building its clout. […]”The uncertainly over Trump and his ‘America First’ is leading countries to realize they need to get on good terms with China,” said a senior Asian diplomat, whose country will be represented by a top leader at the summit. “It’s a great exercise in soft power for China and great timing.” […] Diplomatic sources in Beijing said China had hoped for at least some senior Western leaders to attend to strengthen the plan’s image and make it less China-centric. Beijing is sensitive to any suggestion that what it projects as benign intentions do not have a receptive global audience, especially in Western capitals. But suspicion about China’s motives runs deep. “It’s not win-win, as the Chinese like to say,” said a senior EU diplomat. “It is China seeking to dominate.” Other Western diplomats have expressed concern in private about the attendance of Putin and other leaders from countries with poor human rights records, suggesting that has contributed to senior Western leaders staying away.// Source: Reuters, 26 April 2017.

• //When asked during a press conference on April 18 how many countries were included in the Belt and Road program, Foreign Minister Wang said China “has no intention of designating clear geographic boundaries for the Belt and Road.” “It is an initiative for international cooperation in its essence, and should be open to all like-minded countries and regions,” Wang said. “The initiative is not a member’s club, but a circle of friends with extensive participation.”// Source: Caixin, 10 May 2017.

Country participation

An unofficial list of participating countries with their respective level of participation as well as intergovernmental organizations is compiled by the Diplomat and can be found here (as there is no comprehensive list issued by the authority). What is known is that most of the western countries did not send their respective head of state to the BRF but only representatives of lower level. India did not officially join the Forum but sent only local embassy staff in Beijing, while North Korea sent a delegation, a surprise move in light of the mounting international pressure on North Korea for its nuclear program.

• //China has touted the forum as the major international event of the year, with 29 heads of state or government to be in attendance (along with, of course, Xi himself). International organizations will be well-represented too, with UN Secretary General António Guterres, President of the World Bank Jim Yong Kim, and Managing Director of the International Monetary Fund Christine Lagarde all set to attend. […] So, which countries are actually sending official delegations to the Belt and Road Forum? It’s a difficult question to answer, as there’s no comprehensive list.// Source: The Diplomat, 12 May 2017.

• //Chinese planners had reportedly hoped for at least some top Western leaders to attend the OBOR forum, including British prime minister Theresa May, in order to burnish the plan’s credentials. Instead, the UK, Germany and France sent their lower-ranking officials to Beijing. India was absent. The country has boycotted the Belt and Road Initiative, mainly due to concerns over the China-Pakistan Economic Corridor, a key part of the initiative that runs through disputed Kashmir.// Source: Quartz, 15 May 2017.

• //And the United States, Japan and India are still wary of China’s wider strategic ambitions. India is represented only by local embassy staff and academics, reflecting New Delhi’s deep unease about the project.// Source: SCMP, 14 May 2017.

• //China announced on Tuesday that a North Korean delegation had been invited to attend the upcoming belt and road summit, despite a spat between the communist neighbours. […] Sun Xingjie, a Korean affairs specialist at Jilin University, said he was surprised by the announcement. “It cannot be a good thing because it won’t [help strengthen] international sanctions,” he said. […] Zhang Liangui, a professor of strategic studies at the Communist Party’s Central Party School, said the decision to invite North Korea to the summit was “very unwise”, as it could send the wrong signal to the North’s leader, Kim Jong-un. “North Korea has been engaging in a policy of appeasement, which is aimed at undermining the hard-won international consensus to mount pressure on Pyongyang,” he said. “It is apparently a trap to put China in a dilemma of choosing between implementing UN sanctions and easing pressure on its ally.” […] “It may have proved that the honeymoon between China, the US and South Korea may have come to an abrupt end when it’s just begun,” Sun said.// Source: SCMP, 09 May 2017.

It is reported that some European countries refused to mark their signatures in the joint communiqué due to concerns for environmental standards and transparency in tenders.

• //Some Western diplomats have expressed unease about the initiative, seeing it as an attempt to promote Chinese influence globally. They are also concerned about transparency and access for foreign companies. Germany said its firms were willing to support the Belt and Road initiative, but more transparency was needed. European Commission Vice President Jyrki Katainen told Reuters on Monday that EU member states would not be signing ministerial statements connected to the summit, though he downplayed the significance.// Source: Reuters, 15 May 2017.

Analyses of the Belt and Road Initiatives

Center for Strategic and International Studies painted a general picture of the reactions of countries to the Forum. It also pointed out that the BRF is Xi Jinping’s signature foreign policy effort, which could help him to consolidate his position in the run-up to the 19^th Party Congress. It also noted some concerns about the inadequate environmental and social standards the Initiative might promote, its related unsustainable debt and financial risks of some large infrastructure projects, and the strategic implications of the initiative in favor of China’s growing influence.

• // The Belt and Road initiative is Xi’s signature foreign policy effort. Following on from his meeting last month in Florida with President Donald Trump, the forum represents the next way station in a series of carefully choreographed events designed to burnish Xi’s international leadership credentials and showcase his domestic strength on the road to the 19th Party Congress in the fall, where he hopes to recast the new Politburo lineup in his own image and further establish his position of primacy within the leadership. […] According to the Asian Development Bank, developing Asia must spend $26 trillion by 2030 to maintain its growth, eradicate poverty, and respond to climate change. Many of Asia’s smaller economies have been eager to cooperate with the Belt and Road, particularly to attract infrastructure investment as they aim to develop further and grow into hubs along emerging trade routes. For similar reasons, there are also eager participants in Africa, South America, and some parts of the Middle East. […] Europe and the United States have been more cautious. Reactions within Europe vary widely, with Eastern European states generally more eager to participate in the Belt and Road than their Western neighbors. […] The primary reasons for caution are threefold. First, there are concerns about standards, particularly whether new projects will adhere to adequate environmental and social safeguards. The Chinese-backed Asian Infrastructure Investment Bank (AIIB) claims it will apply existing best standards but more efficiently; AIIB president Jin Liqun has said the Bank will be “lean, clean, and green.” Second, there are economic concerns about unsustainable debt and financial risks, given China’s desire to export its overcapacity, the challenging nature of large infrastructure projects, and the difficult geographic and political environments the Belt and Road aims to traverse. Finally, there are strategic concerns about the Belt and Road’s drivers and implications. Railways, ports, and other infrastructure projects are dual use, leading to speculation that the real value in some economically questionable projects is their military utility. Over the longer term, even more consequential would be the economic power and influence that would accrue to China if the Belt and Road’s ambitions are fully realized.// Source: Center for Strategic and International Studies, 09 May 2017.

In relation to the analysis, some discussions about project sustainability since the announcement of the Belt and Road Initiative in 2013. The Economist noted three problems with the Belt and Road Initiative so far: 1) projects under the banner of B & R Initiative are under poor coordination given the scale of the Initiative, 2) the economic viability of some B & R projects is put into question and analysts suggest they may not be the exception, and 3) involved countries long for and dread Chinese investment at the same time, due to China’s sheer size of economy but its heavy-handed approach to project promotion. Other analyses to look at the issue from other angles can be found on, for example, China Dialogue for China’s involvement in coal-fired power plant project abroad and Science Magazine for greater scientific collaboration.

• //The scheme is running into three linked problems. First, it is unclear what its priorities are, or who is running it. “We haven’t really come up with a specific goal,” says Zou Tongxuan of Beijing International Studies University. Every province has its own belt-and-road investment plan. So do hundreds of state-owned firms. […] But no one is in day-to-day charge, so thousands of financially dubious schemes have the imprimatur of a belt-and-road project. And the overweening behaviour of Chinese companies in some countries where they operate has stoked fears in some places of an over-mighty China. […] A second problem is finding enough profitable projects to match the vaulting ambition of the scheme, which aims to create a Eurasian trading bloc rivalling the American-dominated transatlantic area. […] Belt-and-road projects are failing already. In Kara-Balta in Kyrgyzstan, Zhongda China Petrol, a state-owned company, built a big oil refinery—then found it could not buy enough crude oil to run it at more than 6% of capacity. […] According to Tom Miller of Gavekal, a consultancy, the Chinese think they will lose 80% of their money in Pakistan, 50% in Myanmar and 30% in Central Asia. Perhaps they can afford this, but it would be a costly success. Third, locals in some countries are angry about what they view as China’s heavy-handedness. In parts of Asia, democratic politics have been challenging China’s commonly used approach to deal-making—cosying up to unsavoury regimes. This had begun before Mr Xi devised the belt-and-road scheme. […] The problem is partly one of scale: China is so vast that belt-and-road countries fear being overwhelmed by it. […] Countries both long for and dread Chinese investment.// Source: The Economist, 04 May 2017.

Issue of financial sustainability of OBOR projects

Patrick McCabe from the Wall Street Journal argued that the B & R Initiatives might not be an economically viable deal for all investors, given 1) China’s economic slowdown since 2015, 2) China’s politically motivated infrastructure projects overseas in which costs usually outweigh benefits, and 3) many projects related to the Initiatives are expected a financial loss or being financially unsustainable. In response to the criticisms, one of the heads of State-owned Assets Supervision and Administration Commission of the State Council Xiao Yaqing (肖亚庆) noted that the return on investment has been improving and stressed that the financial risks are controllable.

• //OBOR has a number of red flags that should give prospective backers pause. First, it was announced in 2013, meaning it was conceived using financial assumptions that are now unrealistic. The cash-flow projections were made at a time when China’s double-digit GDP growth seemed unstoppable. […] Second, OBOR outlays are snowballing as other huge ventures with dubious returns take ever-bigger bites of China’s finances. […] China’s politically directed investments in excess infrastructure, “zombie” firms, vanity projects and tens of billions in bad loans to Bolivia, Brazil, Libya, and Venezuela, among others, are notoriously unproductive. Stack China’s losses and obligations on top of slowing growth and it’s no wonder Beijing is eager to find new OBOR investors. […] Third, the initiative is unlikely to deliver on its promises. A 2016 report from the Center for Strategic and International Studies states Chinese officials privately expect to lose 30% of their investments in Central Asia, 50% in Myanmar and 80% in Pakistan. That shouldn’t come as a surprise. A 2016 Oxford University study found costs exceeded benefits for a majority of infrastructure investments in China since 1986. It predicts that unless China shifts to fewer and higher-quality infrastructure investments, the country is headed for a financial crisis.// Source: Wall Street Journal, 24 April 2017.

• //国务院新闻办公室于5月8日举行新闻发布会，请国务院国有资产监督管理委员会主任肖亚庆和中国石油、国家电网、中国移动、国机集团、中国中车、中国交建负责人介绍中央企业参与“一带一路”共建情况，并答记者问。有记者引述美国智库研究提问称，“一带一路”投资在中亚可能会有三成以上亏损，南亚和东南亚国家可能有五成以上的亏损。对此，肖亚庆称，海外投资任何一项投资都会有风险，不可能每一项投资都会百分之百成功。这些年中央企业在“走出去”过程中，总体上是很好的，一年比一年有所进步。[…] 当然，这些过程中，也交了不少学费，也通过国际化的过程，来学习国际上一些通行的规则，来了解投资所在国的法律、人文环境和民俗风情，这样使我们“一带一路”建设过程当中，总体来讲风险是完全可控的。// Source: IFeng Finance, 08 May 2017.

Early projects in the name of OBOR basically included railway development in Southeast Asia and Africa, energy projects and industrial parks, led by China’s state-owned enterprises, details can be found here from Caixin and here from SCMP.

• //As leading players in the initiative, about 50 Chinese state-owned companies have invested in nearly 1,700 OBOR projects since 2013, said the Chinese government days ahead of the Beijing forum. The flagship projects include the $46 billion China-Pakistan corridor, a 3,000km high-speed railway connecting China and Singapore, and gas pipelines across central Asia. The Belt and Road initiative has also entered regions as far as New Zealand, Britain and even the Arctic.// Source: Quartz, 15 May 2017.

David Dollar from the Brookings Institute charted the direction of outward direct investment (ODI) from China and overseas financing from China’s policy banks. He found that the Chinese ODI did not go to OBOR countries but to many developed countries such as the United States, Singapore, Australia, the United Kingdom, etc. in the past year.

• //China’s outward stock of direct investment was $1.3 trillion at end-2016. The most recent data that it has published on the cross-country allocation is for end-2015. A main problem of Chinese statistics is that more than half of its ODI goes to Hong Kong. Hong Kong is probably not the final destination for all of that investment, so it would be helpful to know where this part of Chinese investment is allocated. Leaving aside Hong Kong, the top 10 destinations of ODI were: the Cayman Islands, the Virgin Islands, the United States, Singapore, Australia, the Netherlands, the United Kingdom, Russia, Canada, and Indonesia. Of these, only Russia and Indonesia are along the belt and road.// Source: The Brookings Institute, 08 May 2017.

Risks involved include political instability. German representative in Beijing Michael Clauss pointed out that many of the Belt and Road countries are not attractive to investment for infrastructure from an economic perspective.

• //The regions covered by the initiative have a lot of potential, but two-thirds of the countries are ranked below investment grade. That means it is difficult for these countries to attract investment for infrastructure, which in turn would be important in order to strengthen economic development and political stability. In that respect the initiative could make a significant contribution to alleviate the root causes of migration. That’s obviously very important to us, because Germany is particularly affected by the refugee crisis. That is one of the reasons why Germany fully supports the belt and road initiative, particularly its potential in the areas of connectivity and free trade.// Source: SCMP, 13 May 2017.

 2. China and the US reach trade deal before the Belt and Road Forum

• //China and the United States have reached a comprehensive trade deal well within their 100-day deadline, with Beijing promising to open some financial services to US players, to buy US gas and to end restrictions on beef imports. […] While the 10-point agreement is mainly about China’s promises to open its market wider to US firms and buy more of their products, Washington has also promised to facilitate Chinese bank entrance into the US market and to allow sales of cooked poultry products. Also, a delegation led by a top White House adviser will attend the “Belt and Road Initiative” summit in Beijing on Sunday, offering a sign of endorsement for Xi’s ambitious bid to extend China’s global influence. Huang Rihan, a researcher at the Centre for China and Globalisation in Beijing, said the agreement put an end to worries about a “trade war” between China and the US. Huang Rihan, a researcher at the Centre for China and Globalisation in Beijing, said the agreement put an end to worries about a “trade war” between China and the US. […] “Trump is not interested in China going into the US market, but the US going into the China market,” said Douglas Paal, vice-president for studies at the Carnegie Endowment for International Peace, a Washington think tank. “The 100-day talks are just a start,” said Zhou Shijian, an international relations professor at Tsinghua University in Beijing. “China can buy more … clean energy from the US, and China can mean a lot of business for the US – just think about soybeans, cotton and aircraft.”// Source: SCMP, 13 May 2017.

CHINA – POLITICS

 1. China’s initiative to start a state-sponsored online encyclopedia project

• //China is under pressure to write its own encyclopedia so it can guide public thought, according to a statement by the project’s executive editor Yang Muzhi published last month on the website of the Chinese Academy of Sciences. He once listed Wikipedia, which is available in China, and Britain’s Encyclopedia Britannica as potential rivals and said the project aims to exceed them, according to an article he wrote late last year. The project, which will be under the guidance of the state-owned China Publishing Group, “must have Chinese characteristics,” he wrote, adding it would be a “symbol of the country’s cultural and technological development” and increase its softpower and international influence. Unlike Wikipedia — and its Chinese version Baidu Baike — which are written by volunteers and are in a constant state of revision, the new project, which was approved in 2011, will be entirely written by professionals. So far over 20,000 scholars and academics have been enlisted to compile the project, which aims to have more than 300,000 entries by its 2018 launch.// Source: Hong Kong Free Press, 04 May 2017.

Rogier Creemer from the Leiden University contended that the project is not a Chinese equivalent of Wikipedia as it will be entirely written by professionals selected by the CCP to ensure the Party’s voice in the online environment.

• //First things first. I think it’s inaccurate to compare the proposed encyclopedia with Wikipedia. The whole point of Wikipedia is that it is a bottom-up project, which attempts to build a collective undertaking on the basis of the wisdom of crowds. It is self-generated and self-policing. The Chinese project is nothing other than an online version of the enormous, multi-volume encyclopedias that used to fill the studies of schoolteachers and the upwardly mobile worldwide. It is, perhaps, better to call it the Encyclopedia Sinica. To be sure, this encyclopedia is one of the flagship parts of the broader project, as official parlance has it, to ensure the dominance of the Party’s voice in online discourse. Moreover, this project also encompasses China’s claim to sovereignty in cyberspace: the Chinese Internet authorities assert that as governments are entitled to effective control over their territory and population without interference from other states—as well as non-state actors—in the real world, they are entitled to the same in the online environment. This assertion has drawn opprobrium from various Western observers. […] However, what will be taken from China’s approach is an increasingly powerful role for states in cyberspace. Populations around the world are primarily looking to state actors to protect them from harms online. As a result, many states, including the United States, are now behaving as if they have the right to exercise sovereign power in cyberspace, even as they continue to berate China for claiming its own. […] Increasingly, China’s approach to control starts to look highly prudent to many governments in the global South. Therefore, questions of China’s influence must not be merely seen in the light of whether “we” would take over a Chinese example, but also how the comparative prestige of China’s approach is perceived in third countries.// Source: China File Conversation, 08 May 2017.

 2. Protest against incinerator at Qingyuan of Guangdong Province

• //The city of Qingyuan in Guangdong has reconsidered its plan to build a waste incinerator plant at a local village, following mass protests and clashes between demonstrators and police. Thousands of local residents have protested against the plan for several days, and authorities deployed large numbers of riot police to counter the protests. Residents in the town of Feilaixia also went on strike, abstaining from work and school for several days. […] Although the government said in statements that the project was needed to handle the high volume of local waste, a local resident told Hong Kong broadcaster TVB that villagers were misled by the local government. “When the project first came down, [the government] told us that it was an environmentally-friendly renewable energy plant, they did not say that it was a waste incinerator at the time.” […] Another resident told RFA that they did not trust the government to prevent the plant from emitting toxic chemicals. The government announced it would scrap its plan to build the incinerator in Shili village in the town of Feilaixia at a press conference Wednesday afternoon, according to its social media accounts. It said that it made the decision after taking residents’ concerns into consideration. Crowds dispersed after the announcement was made, Apple Daily said. The municipal government also said that it was not currently considering any other site for the project. It is unclear whether it may do so in the future, nor is it clear whether the project has been cancelled, or merely postponed.// Source: Hong Kong Free Press, 12 May 2017.

• //廣東清遠市飛來峽鎮過萬民眾，自本月初起連日抗議政府在該鎮興建垃圾焚化廠，前日起全鎮村民更發動罷市罷課。同晚數千村民更在清遠市中心商業區示威，引發 大規模衝突。警員用警棍追打民眾並施放催淚彈（圖），有民眾被拘留。至昨午政府宣佈取消在當地建垃圾焚化廠，民眾陸續散去。// Source: Apple Daily, 11 May 2017.

HONG KONG – POLITICS

1. CY Leung admitted to intervene into a legislative probe into his UGL payout

Due to the public concerns for the Chief Executive CY Leung’s misconduct in office over receiving 50 million HKD for a “non-compete and non-poach” agreement with UGL in 2011, the Legislature in Hong Kong has set up a select committee to inquiry the issue early this year (details by SCMP here). The committee held discussion in recent days to discuss the scope and depth of the investigation. Recently, it was revealed that CY Leung approached the vice-chairman of the committee Holden Chow and made a number of revisions to the committee’s document in discussion, which were ostensibly made by Chow and in fact by Leung under the table. Chow and Leung admitted the case after the media revelation, but insisting no breaking of the rules or any law.

• // Hong Kong’s leader has confirmed his role in amending proposals in a document to change the scope of a Legislative Council investigation into him, claiming that he was completely “within his rights” to ensure that the probe was “comprehensive” enough. Speaking to reporters before Tuesday morning’s Executive Council meeting, Chief Executive Leung Chun-ying admitted that he had indeed submitted revisions to pro-establishment lawmaker and investigation committee vice-chairman Holden Chow Ho-ding. […] The select committee, set up last year at the behest of the pan-democrats, is tasked with investigating a HK$50 million payment Leung received from an Australian firm before he became Hong Kong’s leader. On Monday, opposition pan-democrats raised the issue after it was revealed that a proposal set out in a document by Chow to change the scope of the investigation may have originated from Leung’s office. Multiple amendments made to the document were traced to the user names “CEO-CE” on April 21. Leung has not denied this.// Source: SCMP, 16 May 2017.

• //The changes broadened the scope of the enquiry by adding questions such as whether the UGL agreement is authentic and whether Leung should have declared the payment to the top judge. The additional questions may provide Leung with an advantage by slowing down the investigation and creating more opportunities for critics to question its results. […] The agreement with UGL was signed at the end of 2011, before Leung joined the chief executive election. But some of the payments were received after he was chosen as the Hong Kong leader in 2012.// Source: Hong Kong Free Press, 16 May 2017.

• //Chow said Leung contacted him to give him his opinion on the document. Both Leung and Chow claimed that the document was “always public” and that anyone could make comments. The Microsoft Word document sent by the secretariat to lawmakers showed Leung’s edits, though lawmakers would have to check it carefully to notice. Chow claimed he never concealed the changes. “I read it, considered it and found it appropriate to submit to the committee for discussion,” he said. “I have never concealed anything, I have not broken any rules and laws.”// Source: Hong Kong Free Press, 16 May 2017.

2. Zhang Dejiang’s visit to Macau and its implication for Hong Kong

Zhang Dejiang as the head of the NPCSC paid a visit to Macau in early May, praising Macau as a good example for One Country Two Systems during his stay. Commentator from the Hong Kong Newspaper Economic Journal SC Yeung argued that Zhang’s speech is indirectly targeted at Hong Kong.

• //Zhang Dejiang, chairman of China’s national legislature, was speaking a day after he heaped praise on Macau for its patriotism and regard for national security, holding up the special administrative region as an example to its counterpart across the Pearl River Delta of how to meet Beijing’s expectations. […] On Tuesday, Zhang urged the Macau government to experiment with the implementation of national education – a curriculum to teach pupils about China and its history – which remains a sensitive topic in Hong Kong after the city’s government shelved such a plan in 2012 amid public opposition. Sulu Sou Ka-hou, vice-president of the pro-democracy New Macau Association, said Zhang’s remarks were another warning to Macau about what it should not learn from Hong Kong. “There is a Hong Kong factor in his remarks … but I don’t think ideas such as localism or independence can be discussed in campuses here like in Hong Kong, because there is no such freedom or space,” Sou said.// Source: SCMP, 10 May 2017.

• //The former Portuguese colony has achieved success as patriotic values have taken root there, he said, taking an indirect dig at Hong Kong. […] Although Zhang did not name Hong Kong directly during his Macau speech, it was clear that he was sending a message to the incoming administration about Beijing’s unhappiness with Hong Kong, which has seen several anti-China protests in recent years. Macau, Zhang said, benefited as its people did not waste their energy and time on useless political arguments. Residents of the former Portuguese enclave have been pragmatic, enabling them to seize opportunities and further their economic advancement, he said. “Patriotic forces” have maintained a leading position in Macau’s society, having correctly understood the implementation of the “one country, two systems” principle, the Chinese leader added. Zhang’s remarks in Macau, it is now clear, were mostly about sending a message to Hong Kong on how to become a “good child” in the eyes of Beijing.// Source: EJ Insight, 11 May 2017.

Susanne Pepper wrote on Hong Kong Free Press about Beijing’s stand toward Hong Kongers in the midst of localism:

• //So pro-Beijing surrogates and champions have begun, finally, using Beijing’s definitions to explain directly to the people of Hong Kong what the promises [50-year no change] mean. […] But now that Beijing is beginning to reveal its real intentions, how does it plan to bring Hong Kong’s voters and marchers into line? The main themes are clear. First, clamp down hard on “separatists” of all kinds. Beijing does not distinguish between independence, self-determination, or autonomy. As all of Hong Kong’s main political groups have come out at least for self-determination, they are all on the hit list. Second, pro-Beijing politicians are gearing up for the by-elections to follow the disqualification of Legislative Councillors. That will give loyalists a second chance to make the post-Occupy gains that eluded them last year. Third is how best to use any such gains, but officials seem still to be debating among themselves. Carrie Lam says she wants to focus on livelihood issues and set aside contentious challenges like political reform. […] But with or without political reform, loyalists are not trending toward conciliation. Instead, their thoughts are headed in the opposite direction: the need to revive Article 23 national security legislation.// Source: Hong Kong Free Press, 07 May 2017.

TAIWAN – DIPLOMACY

1. China to bar Taiwan from participating in the UN’s World Health Organization Conference

Taiwan has been barred from joining the UN’s World Health Assembly this year due to China’s pressure. It was allowed to participate as an observer in the previous year. The Beijing government openly noted that the ban on Taiwan’s participation is a result of the Taipei government’s refusal to recognize the 1992 consensus.

• //Taiwan will continue to seek inclusion in the World Health Assembly’s annual meeting this month in Geneva, government officials said on Monday, pushing back against the latest in a series of efforts by China to block the self-ruled island from participating in international organizations. […] Beijing, which claims sovereignty over Taiwan and has vowed to annex it by force if necessary, seeks to pressure Ms. Tsai into accepting the so-called 1992 Consensus, which holds that there is only one “China,” encompassing the Chinese mainland and Taiwan, although each side has its own interpretation of what that means. As a permanent member of the United Nations Security Council — a seat once held by Taiwan — China has considerable sway over the World Health Organization, the United Nations agency that convenes the World Health Assembly. On Monday, the director of Beijing’s Taiwan Affairs Office, Zhang Zhijun, said the Tsai government’s refusal to recognize the 1992 Consensus was responsible for the breakdown of communication channels between Beijing and Taipei and for Taiwan’s ineligibility to participate in the World Health Assembly. […] The SARS epidemic of 2002-3 highlighted the human cost of the political isolation of Taiwan by the World Health Organization. Researchers in Taiwan said they were hampered in their efforts to obtain valuable data on the virus from the W.H.O., while patients in Taiwan died and the virus continued to spread in Taiwan and China.// Source: New York Times, 08 May 2017.

• //Taiwan is rallying international support to challenge pressure from the mainland to exclude the island from a United Nations health meeting this month. Soon after Taiwan’s health authorities acknowledged on Tuesday that Taipei failed to get the necessary invitation from the World Health Organisation to attend the World Health Assembly in Geneva on May 22-31, Japan said it would support the island taking part in the gathering. […] Taiwan’s Mainland Affairs Council also issued a statement protesting against the mainland for the WHA snub, saying the move would only harm cross-strait relations. […] Analysts said Taiwan hoped to get as much international support as possible to counter the mainland’s pressure and it was natural for Japan and the United States, with which the Tsai administration hoped to establish a close security alliance, to back its WHA bid. “But other than voicing support, it would be unlikely for Japan and the US to clash with Beijing to get Taipei in the assembly,” said Sun Yang-ming, vice-president of the National Policy Foundation.// Source: SCMP, 09 May 2017.

• //Observers say China has yet to really flex its muscles and that could happen in the year ahead. The two sides are in a tense “holding pattern”, says Jonathan Sullivan, director at the University of Nottingham’s China Policy Institute. Beijing is currently preoccupied with domestic issues ahead of a key Communist Party congress later this year, which could cement President Xi Jinping’s grip on power for years to come. After that, the gloves may come off. “Given the consolidation of both Xi’s position and the relationship that seems to be emerging with (US President Donald) Trump, I don’t see that Beijing’s own position is going to soften,” Sullivan told AFP. Jean-Pierre Cabestan, a political scientist at Hong Kong Baptist University, Beijing “will be tempted to use all sorts of ways to increase its pressure on Taiwan — economic, political, and military — to force it to give in”, he said.// Source: Hong Kong Free Press, 10 May 2017.

Meanwhile, Fiji, which has no official diplomatic relations with Taiwan, has closed its representative office in the island recently, citing a review of budget worldwide as the reason. Soon after the closure, Fiji’s leader visited Beijing for the Belt and Road Forum and the Beijing government agreed to deepen cooperation with Fiji.

• //Fiji has closed its representative office in Taiwan. Taiwanese media quote Fiji’s representative Karai Vuibau as saying the closure follows a review of Fiji’s embassies and missions worldwide. The closure coincides with Fiji’s prime minister Frank Bainimarama attending China’s Belt and Road summit in Beijing this week. […] The office served as Fiji’s de facto embassy in Taiwan in the absence of formal diplomatic relations. Taiwan has diplomatic ties with several Pacific countries, including Solomon Islands, Kiribati and Nauru. […] According to its president, Xi Jinping, China wants to expand cooperation with Fiji. Xinhua reports Mr Xi met with the Fijian prime minister Frank Bainimarama on Tuesday. Mr Bainimarama has been attending a two day infrastructure summit, the Belt and Road Forum for International Cooperation, in Beijing. The news agency reports China is willing to expand cooperation with Fiji on agricultural technology, green development, investment and trade. Mr Xi told Fiji’s leader that China would encourage more tourists to Fiji and support the expansion of Chinese business in Fiji.// Source: Radio New Zealand, 18 May 2017.

2. The first anniversary of Tsai Ing-wen’s presidency

As the first anniversary of Tsai’s presidency approaches, there are some discussions about her performance in the past year. On the political front, cross-strait relations continue to be tense with the suspension of official cross-strait talks together with Beijing’s constraint on Taiwan’s international space. On the economic front, Bloomberg noted that there has been improvement in trade, which contributes to highest forecast of economic growth rate in Taiwan since 2015. The loss of tourists from Mainland China has been made up by the increase in tourists from South Asia given the new incentives rolled out by the Tsai government. Yet, wage growth remains stagnant. China Times reported that the unemployment rate for the youth rose to 12.07%, the highest since 3 years ago and the growth in private investment increased at a 5-year-low rate. Analysts generally argued that the Tsai Administration should take greater effort in solving the economic problems in Taiwan to recover her declining approval rating.

• //Rebounding global trade has prompted the government to raise its growth forecast to 1.92 percent for this year, the benchmark Taiex stock index climbed to a 17-year high above 10,000 points last week, and the Taiwan dollar is the best-performing Asian currency over the past year. Equity fund inflows are among the largest in Asian markets in the past year. […] A record number of people visited Taiwan in 2016 as increasing arrivals from Southeast Asia made up for plunging numbers from mainland China. Chinese visitors fell by 45 percent in March versus a year earlier. Arrivals from Southeast Asia rose by a similar amount over the same period after Taiwan introduced incentives including visa-free entry. Still, economic challenges remain, including stagnant wage growth, which Tsai promised in her inauguration speech to tackle. The average monthly pay rose 0.6 percent in 2016 from the previous year to NT$48,790 ($1,512), while the average annual rise was 1.46 percent over the past two decades, according to the statistics agency. South Korea wages increased 3.8 percent last year.// Source: Bloomberg, 15 May 2017.

• //總統蔡英文就職將屆滿一年，今年民間投資預測僅成長85％，創5年來新低，首季青年失業率12.07％，也創近3年同期最高，實質薪資更倒退17年，政大經濟系教授林祖嘉表示，一年來政府在拚經濟方面交了白卷，所推動的政策對於帶動投資與就業的效果非常小，令人擔心。中研院院士管中閔也呼籲，執政者必須清楚當前台灣真正的問題是經濟問題，而非「轉型正義」等政治問題。第一要務就是得改變國內經濟經營的環境，徹底拿掉管制心態，建立透明法制，這樣才能吸引投資，否則台灣將會一直積弱不振下去。// Source: China Times, 17 May 2017.

KMT-think tank National Policy Foundation, among other public polls, announced a recent survey which found Tsai’s approval rating dropped to 33.4%, compared to the dissatisfaction rate of 58.7%. The survey also suggested that the respondents are least satisfied with issues such as cross-strait relations, food safety, and rich-poor gap in descending order. Hong Kong Free Press reported that residents are dissatisfied with Tsai because they are unable to feel the impact of her policies.

• //國家政策研究基金會今（10）日發布「蔡英文執政一週年」民調，蔡英文滿意度僅剩4%，不滿意度則高達58.7%；林全內閣滿意度僅剩23.7%，不滿意度高達62.4%。政策部分，民眾不滿意度最高的項目依序是「兩岸關係」、「食品安全」、「貧富差距」。國政基金會孫立群執行長表示，這次民意調查調查時間為5月4日到6日，調查方式以電訪方式，有效樣本數1077個，在95%信心水準下最大誤差值不超過正負2.99%。民意調查結果顯示，蔡英文滿意度33.4%，不滿意度則高達58.7%；林全內閣更低，滿意度僅有23.7%，不滿意度則高達62.7%。[…] 文化大學法律系吳盈德副教授表示，年輕人理想性高，是支持蔡英文的主要族群之一，年輕人對蔡英文支持度降低，執政後與時代力量的摩擦，沒有達到年輕人的訴求，施政順序上最先開闢的戰場是轉型正義與年金改革，時程拖得久成效未彰顯；而民眾最不滿意的依序是兩岸關係、食品安全、貧富差距，她的施政沒有優先回應社會關切的事，對於其他民眾關心的重要議題例如兩岸關係，則沒有明確作為。// Source: New-walk, 10 May 2017.

• //Economic woes were one of the main reasons Tsai was elected, as low salaries failed to compete with cost of living. But although GDP has rallied, up 2.88 percent in the last quarter of 2016, Tsai’s initial 70 percent approval rating has sunk to below 30 percent in some polls. Residents say despite promised reforms and incentives, such as better social welfare and tax cuts, there has been little real improvement in day-to-day lives. “For young people, we need to make more money, we need pay rises. We need hope that we can live better lives,” said Taipei salesman Yu Ya-han, 27. Last month there were violent protests against proposed public-sector pension cuts. Some analysts say Tsai must work harder to strike a chord with the public in her second year, with policies that have a more immediate impact.// Source: Hong Kong Free Press, 10 May 2017.

Fan Shih-Ping from the Graduate Institute of Political Science of National Taiwan Normal University argued in February that Tsai’s low approval rating was attributed to the many reforms her government had initiated since her presidency:

• //范世平 [台灣師範大學政治學研究所] 說，回顧去年，蔡政府推動的改革，戰場開太多，這些改革與原來支持者也產生極大的矛盾，例如「一例一休」，表面上看起來對勞工好，卻影響服務業勞工，也衝擊長期支持民進黨的中小企業；此外，同性婚姻法案在長老教會內，也不見得支持。范世平指出，獲得多數民眾支持的年金改革，是農曆年後第一個主戰場，相當重要，蔡政府應該大膽、放手去做，並透過大數據分析，了解主流民意所在，順著民意推動改革，年金改革就能為蔡政府真正加分。范世平表示，民眾期待「除弊」之外，最重要還要「興利」。因此他建議蔡政府戰場不宜開太多，否則哪有時間拚經濟？而且改革的刺激越多，民眾也會越來越無感，改革的「邊際效應」也會隨之遞減。范世平強調，「改革是開胃菜，不能當主菜吃，主菜還是經濟」，蔡總統在去年最後一天，對人民宣示今年政府施政將全力提振台灣經濟，但都已過了一個月，卻沒看到拚經濟的方法。明年此時，經濟若仍沒太大起色 ，民眾對於改革的熱情與期盼還剩多少？// Source: Liberty Times, 01 February 2017.